Estate Planning - Living Trusts and Wills
Posted: Sun Jan 21, 2007 11:34 am
From: 
lovetor2i (Original Message)Sent: 3/1/2004 8:39 AMHi,
I have a question about Inheritance rights. Will the money in 401K, bank accounts, Real estate automatically belong to kids if both parents die (God Forbid!) ? Also, is the surviving spouse automatic beneficiary of the above assets? (Assuming in both the above cases, there is no Will.)
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From:guruswSent: 1/20/2007 3:10 PMI never found similar threads in the forum, and this one is not answered. I had a few questions myself about Inheritance.
If I am GC holder or USC, what are the tax implications when inherit property (money, real estate, mutual funds) from parents in India?
If I am GC holder or USC, and if I die, who owns my property in the absence of will (say I have surviving wife/kids in USA, and surviving parents in India). Can I have a will that gives property rights to my wife or parents?
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The question posed above revolves around if one dies in USA without a will, how are assets distributed and what are tax implications.
Your 401K and IRA have beneficiary designations. There you specify beneficiary and contingent beneficiaries. These overide the will, if there is one. Your beneficiaries will have to file a claim with the 401K and / or IRA custodian and claim the money. The process is this simple. If however the beneficiary is a minor, then a custodian of the minor will be given the authority to manage the 401K and IRA. This custodian must be a surviving parent or in absence of any surviving parent, a court appointed guardian. The court will appoint guardian based on what is stated in a WILL. Since we are discussing a situation where no WILL exists, then in that case, it is upto the court. A court may accept a competent close relative's petition in such a case or appoint some financial institution to manage the financial affairs of the minors.
The Real estate and banks, brokerage accounts in USA do not automatically have beneficiary. If you have joint account (with rights of survivor ship) then the surviving joint account holder gets access and ownership to the accounts without any problems, the same way they had access and ownership before the other hoint account holder's death.
In case where an account owner dies and does not hold joint accounts (with no TOD or POD, which I will discuss a little later below) and there is no WILL, the state law will apply. The state law varies from state to state and in most cases a certain percentage of these assets go to the surviving spouse and the rest to children. In case there are no children, a certain percentage to spouse and a certain percentage to parents in some states and yet in others in such cases all of it to spouse.
If both spouses die and children survive, in such a case again the state law rules and in most all states these go to children. The individual state law needs to be looked at for detail, if one wants to. Of course a guardian would be appointed for children.
Whether there is a WILL or not, upon death a court administered process called Probate has to occur. For simple and small estates, many states have simplified procedures which does not require involving courts. However if there is real estate or substantial assets, the court will get involved in the process of probate.
To make the process easier, here are a few suggestions:
1. For all tax deferred accounts, make sure that you have beneficiaries AND contingent beneficiaries defined.
2. For bank accounts, preferable account option is a joint account with right of survivorship.
3. Whether single or joint bank account, get a form from the bank called POD (Payable on Death) and specify who you want the money to go to upon your death. Specify contingent beneficiaries too. Submit to bank and keep a copy with your important documents. This will bypass WILL, Courts etc, except when the beneficiary is a minor. The bank will not give access to the money to minor and a financial custodian by the courts will have to be appointed.
4. For taxable brokerage accounts, whether joint or single, get hold of a copy of Transfer on Death (TOD) form. This instructs the institution that upon your death they are to transfer the stock and bond ownerships as well as cash to designated beneficiaries. Same caveats as above for minors apply.
5. Real estate goes to the joint account holder if the holding is joint, or ownership is transferred per the WILL if one exists; if not then, the laws of the state rule. Re registration of the house in new ownership names has to be done at the county offices.
Simple Wills for real estate and other small assets and assigning a guardian of your choice for minor children can be accomplished by Nolo Wills or other such sites on internet. Complex wills may require an attorney.
The courts, as a part of probate will want all the debts paid out first. Thi is the responsibility of the administrator which the court will assign in absence of a WILL for a estate that is large enough or one that has to go thru the probate per the state law.
If the estate of a US resident is less than 2 million (this includes life insurance proceeds if the deceesed was the owner of life insurance policy), then there are no estate taxes due. But if the estate is greater, then it is the responsibilty of the administrator to makes usre estate tases are paid before assets are distributed.
lovetor2i (Original Message)Sent: 3/1/2004 8:39 AMHi,I have a question about Inheritance rights. Will the money in 401K, bank accounts, Real estate automatically belong to kids if both parents die (God Forbid!) ? Also, is the surviving spouse automatic beneficiary of the above assets? (Assuming in both the above cases, there is no Will.)
-----------------------------------------------------------------
From:
guruswSent: 1/20/2007 3:10 PMI never found similar threads in the forum, and this one is not answered. I had a few questions myself about Inheritance.If I am GC holder or USC, what are the tax implications when inherit property (money, real estate, mutual funds) from parents in India?
If I am GC holder or USC, and if I die, who owns my property in the absence of will (say I have surviving wife/kids in USA, and surviving parents in India). Can I have a will that gives property rights to my wife or parents?
-----------------------------------------------------------------------------------------------------------------------
The question posed above revolves around if one dies in USA without a will, how are assets distributed and what are tax implications.
Your 401K and IRA have beneficiary designations. There you specify beneficiary and contingent beneficiaries. These overide the will, if there is one. Your beneficiaries will have to file a claim with the 401K and / or IRA custodian and claim the money. The process is this simple. If however the beneficiary is a minor, then a custodian of the minor will be given the authority to manage the 401K and IRA. This custodian must be a surviving parent or in absence of any surviving parent, a court appointed guardian. The court will appoint guardian based on what is stated in a WILL. Since we are discussing a situation where no WILL exists, then in that case, it is upto the court. A court may accept a competent close relative's petition in such a case or appoint some financial institution to manage the financial affairs of the minors.
The Real estate and banks, brokerage accounts in USA do not automatically have beneficiary. If you have joint account (with rights of survivor ship) then the surviving joint account holder gets access and ownership to the accounts without any problems, the same way they had access and ownership before the other hoint account holder's death.
In case where an account owner dies and does not hold joint accounts (with no TOD or POD, which I will discuss a little later below) and there is no WILL, the state law will apply. The state law varies from state to state and in most cases a certain percentage of these assets go to the surviving spouse and the rest to children. In case there are no children, a certain percentage to spouse and a certain percentage to parents in some states and yet in others in such cases all of it to spouse.
If both spouses die and children survive, in such a case again the state law rules and in most all states these go to children. The individual state law needs to be looked at for detail, if one wants to. Of course a guardian would be appointed for children.
Whether there is a WILL or not, upon death a court administered process called Probate has to occur. For simple and small estates, many states have simplified procedures which does not require involving courts. However if there is real estate or substantial assets, the court will get involved in the process of probate.
To make the process easier, here are a few suggestions:
1. For all tax deferred accounts, make sure that you have beneficiaries AND contingent beneficiaries defined.
2. For bank accounts, preferable account option is a joint account with right of survivorship.
3. Whether single or joint bank account, get a form from the bank called POD (Payable on Death) and specify who you want the money to go to upon your death. Specify contingent beneficiaries too. Submit to bank and keep a copy with your important documents. This will bypass WILL, Courts etc, except when the beneficiary is a minor. The bank will not give access to the money to minor and a financial custodian by the courts will have to be appointed.
4. For taxable brokerage accounts, whether joint or single, get hold of a copy of Transfer on Death (TOD) form. This instructs the institution that upon your death they are to transfer the stock and bond ownerships as well as cash to designated beneficiaries. Same caveats as above for minors apply.
5. Real estate goes to the joint account holder if the holding is joint, or ownership is transferred per the WILL if one exists; if not then, the laws of the state rule. Re registration of the house in new ownership names has to be done at the county offices.
Simple Wills for real estate and other small assets and assigning a guardian of your choice for minor children can be accomplished by Nolo Wills or other such sites on internet. Complex wills may require an attorney.
The courts, as a part of probate will want all the debts paid out first. Thi is the responsibility of the administrator which the court will assign in absence of a WILL for a estate that is large enough or one that has to go thru the probate per the state law.
If the estate of a US resident is less than 2 million (this includes life insurance proceeds if the deceesed was the owner of life insurance policy), then there are no estate taxes due. But if the estate is greater, then it is the responsibilty of the administrator to makes usre estate tases are paid before assets are distributed.